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Botswana’s economic stimulus to prevent financial deficit narrowing rapidly

24th October 2016

Creamer Media Senior Deputy Editor

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JOHANNESBURG (miningweekly.com) – The next two years will see a gradual narrowing in Botswana’s financial deficit as mining recovers; however, continued government capital expenditure (capex) requirements will prevent the surplus seen during the commodity boom.

Data released by BMI Research shows the Southern African country’s deficit decreasing from 4.5% of gross domestic product in the 2016/17 financial year to 3.6% in the 2017/18 financial year.

“A gradual recovery in diamond production and prices will bolster revenues, but economic stimulus – to support weak economic growth and boost long-term development – will keep spending high,” BMI noted.

The forecast diamond production of 16.3-million carats for 2017 is lower than the average yearly output of 22.8-million carats between 2006 and 2015.

Mineral revenues currently accounted for around 35% of total government revenues, and one aim of the accelerated spend is to wean the country off its dependence on commodities.

Increased investments into Botswana’s Economic Stimulus Programme were expected to stimulate the economy and allow a diversification into the agriculture, tourism, manufacturing, education and healthcare sectors.

“While current expenditure will rise by only 4.2% in 2016/17, capex will grow by 28.2% and 11% over 2016/17 and 2017/18 [respectively], compared with modest growth of only 4.6% over the past five years,” BMI added.

Capital spending will rise from 23.5% of total expenditure in 2015/16 to 29.9% in 2017/18.

Edited by Creamer Media Reporter

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